Telstra-TPG refusal not intended to dull future network sharing deals

The Australian Competition Tribunal does not want its refusal of the Telstra-TPG deal to be read as it being opposed to mobile network sharing arrangements more generally.

The Tribunal determined Wednesday that a proposal by Telstra and TPG to share spectrum and network equipment in regional Australia should not proceed, backing an earlier decision by the ACCC.

The full reasons for the determination may not be public for some weeks, as lawyers work out [pdf] which parts are confidential and need to be redacted. 

However, a short summary of reasons was published [pdf], which includes a defensive position mounted by the Tribunal of mobile network sharing arrangements.

The Tribunal’s position is effectively that the terms of the Telstra-TPG arrangement aren’t representative of what is achievable via mobile network sharing arrangements generally.

“The Tribunal wishes to record that its determination relates to the proposed transaction in its present form,” it said.

“The Tribunal’s determination should not be understood as suggesting that network sharing arrangements between the mobile network operators would always have the effect of substantially lessening competition or give rise to net public detriments.”

The Tribunal said the benefits of mobile network infrastructure sharing are “particularly pronounced” in regional areas, making deeper deployment of infrastructure and availability of services more commercially viable.

It wrote that this was “common ground” among the various parties to the case, and that the Tribunal itself is for these kinds of arrangements being struck.

“The Tribunal considers that there are strong commercial and economic incentives for the mobile network operators to share mobile network infrastructure in regional areas, and appropriately structured arrangements are capable of delivering efficiency benefits without substantially lessening competition,” it said.

“This determination should not be understood as indicating a contrary conclusion.”

Optus weighs on determination

The Tribunal was ultimately left unconvinced that there was a net public benefit in allowing the Telstra and TPG deal to proceed.

It saw limited benefit for TPG, but substantial upside for Telstra, adding this would have “a material effect on its competitive position vis a vis Optus and would undermine Optus’s incentives to invest” in regional Australia.

“Over time, the network quality gap between Telstra’s network and Optus’s network would be likely to increase,” the Tribunal determined.

“As a consequence, the competitive constraint that Optus currently imposes on Telstra would be likely to weaken, which would enable Telstra to maintain higher prices and margins than would otherwise be the case. 

“The reduction in competitive constraint would also reduce the pressure that Telstra faces to invest in and upgrade its network.”